The One Thing We Cannot Do…Is Nothing
When people ask Kenneth Frazier, CEO of Merck & Co., Inc., to make the business case for diversity, he says, “First, I want you to make the case for homogeneity.” It may sound absurd even though homogeneity may be the norm in many companies, but it’s nearly impossible to make the case that it’s good for business. For starters, there is very little research on the impact of homogeneity on a company’s overall performance. And more importantly, recent research shows that homogenous groups make overly simplified judgments—a consequence of “group think”— that lead to inaccurate decisions.
On the other hand, there is an overwhelming amount of evidence that diversity and inclusion affect a company’s ability to innovate and impact the bottom line. Companies in the top quartile for racial and ethnic diversity are 35% more likely to have returns above the national medians for their industry. Diverse teams have been shown to generate more than thirty percent of their revenues from innovative products and services, and companies with at least one woman on the board yield higher returns on equity and higher net income. A study released just a few days after I heard Ken’s remarks at the recent CEO Action for Diversity & Inclusion event, concluded that there is a significant correlation between the diversity of management teams and overall innovation, as much as 19% higher than in companies with below-average “leadership diversity.”
The evidence is certainly convincing: companies with diverse employees and leaders perform better. But in a world with so many complex societal challenges, financial performance can no longer be the only measure of success. We must also evaluate impact—engagement in communities and broader outcomes. It’s not simply a matter of hiring, retaining and fostering the careers of a diverse group of employees today, but helping to develop the diverse talent we’ll need in the future. And to do that, companies must make a commitment to closing the opportunity gap and helping to provide equitable access to education, training, tools, and opportunities in the communities where we work. Business cannot thrive where communities fail. And unless we address societal challenges, the opportunity gap, wealth disparity and demographic pressures—all of which are intrinsically related to diversity and inclusion—chief among them, communities cannot grow and prosper.
One significant societal challenge seems to tower over the others, and it’s an issue intimately tied to diversity and inclusion: declining trust in institutions. Business must create trusting environments where difficult conversations about race, ethnicity, ability/disability, gender equality, LGBT issues, religion, age, and privilege can take place and where diversity and inclusion are not merely encouraged, but expected. We must demonstrate that we are sincerely and authentically contributing to the creation of a diverse and inclusive workforce for the future, by addressing the opportunity gap, among other efforts. And we must work together, collaborating across industries, and with government and civic agencies, educational institutions, and community organizations to create societal change.
Working together is what inspired CEO Action for Diversity & Inclusion,™ and the recent event for nearly 250 HR and D&I leaders where Kenneth Frazier and other inspiring speakers shared their ideas about advancing diversity and inclusion in their organizations. For us at PwC, CEO Action is one component of a larger commitment to Responsible Business Leadership, a multifaceted effort to hold ourselves accountable for meeting business objectives, addressing both urgent and long-term societal challenges and building trust among all of our stakeholders—clients, employees, the organizations with whom we collaborate and the communities where we work and live. There may be as many—diverse—ways to address our complex societal challenges as there are types of businesses. The one thing we cannot do is nothing. Businesses must become trusted allies whose objectives and strategies are aligned with broader outcomes and who apply their knowledge and resources to address societal change and help every community thrive. It’s not hard to make a case for that.